The Securities and Exchange Commission (SEC) is expecting Filipinos to boost their investment in retirement funds under Personal Equity and Retirement Account (PERA) products due to a tax cut in an employer’s contribution to their workers’ personal retirement fund.
In particular, the Capital Markets Efficiency Promotion Act (CMEPA)—which standardizes the withholding tax on interest earned from deposit products at 20%—also provides an additional 50% tax deduction to the actual contributions of employers who contribute an amount equal to or greater than their employees’ contributions to PERA.
PERA, established under Republic Act 9505, or the PERA Act of 2008, is a voluntary retirement saving program available to the public apart from existing national pension schemes such as Social Security System (SSS) or Government Service Insurance System (GSIS).
Unlike the existing mandatory pension schemes, PERA does not require a deduction from one’s salary to accumulate funds.
“The CMEPA strengthens the role of PERA by offering stronger incentives for long-term savings. It encourages companies to support their employees’ retirement planning while simultaneously increasing the capital available in the financial system, stimulating the local stock market,” said SEC Chair Francis Lim.
“At its core, CMEPA is designed to align the Philippine capital markets more closely with regional peers by removing longstanding barriers to investor participation. This supports the Commission’s mission to continue introducing reforms that will increase the local market’s competitiveness. The strict implementation of provisions under CMEPA is key toward ensuring broader public participation in the capital market and fostering a deeper investment culture among Filipinos,” added Lim.
Apart from the uniform 20% withholding tax on interest income from savings accounts regardless of maturity or lock-in periods, CMEPA reduced the stock transaction tax (STT) to 0.1% from 0.6%.
The law also slashed the Documentary Stamp Tax (DST) on the original issuance of shares of stock to 0.75% from 1% of par value—an incentive for companies seeking capital through initial public offerings (IPOs) or follow-on equity listings.
CMEPA also “harmonized” the capital gains tax to a flat 15% on shares of foreign corporations as the Philippines aligns its tax regime with global standards to help attract more foreign investments. — VDV, GMA Integrated News